Retirement Reality

[samclem]

Quote:

Originally Posted by Moneygrubber But if you planned on a 95% success rate for crossing the street you would never leave the sidewalk.

You aren't increasing your credibility. Do you think that 1 out of 20 people crossing the street gets hit by a car? Of course not. We plan for (and demand) a much higher than 95% probability of success when crossing the street.

The rational thing to do when evaluation options in an uncertain environment is to examine the 1) likelihood of various outcomes and the 2) consequences of various outcomes. If you could quantify these outcomes (i.e. assign numbers to the "chances" and the "goodness or badness" of each one) you'd then multiply the two factors and have a good way to compare them. Then you'd take a course that maximizes the overall "future happiness" by allocating resources to each option. That's what we do when we buy insurance--we spend a little to reduce the consequences of a low-likelihood event that would otherwise have devastating consequences. Setting aside resources for a possible long (above average) lifespan is the same thing.
Another thing: Monthly spending generally has diminishing returns. To a person with just a $1500 SS check, having another $1K/mo would be quite a huge improvement in giving them more options. If you're already getting $5K per month, another $1000 doesn't provide nearly the same increase in happiness/options. So, if I pay $1000 more to buy a first-class airplane seat for my trip to Cabo when I'm 55, and I run out of money when I'm 70 and have to live on a $1500 SS check, I'm not sure that I've done myself any favors. That $1000 would have bought a lot more happiness and options when I am broke than I enjoyed on that 3 hour plane trip.

[Moneygrubber]

Quote:

Originally Posted by samclem You aren't helping increasing your credibility. Do you think that 1 out of 20 people crossing the street gets hit by a car? Of course not. We plan for (and demand) a much higher than 95% probability of success when crossing the street. The rational thing to do when evaluation options in an uncertain environment is to examine the 1) likelihood of various outcomes and the 2) consequences of various outcomes. If you could quantify these outcomes (i.e. assign numbers to the "chances" and the "goodness or badness" of each one) you'd then multiply the two factors and have a good way to compare them. Then you'd take a course that maximizes the overall "future happiness" by allocating resources to each option. That's what we do when we buy insurance--we spend a little to reduce the consequences of a low-likelihood event that would otherwise have devastating consequences. Setting aside resources for a possible long (above average) lifespan is the same thing. Another thing: Monthly spending generally has diminishing returns. To a person with just a $1500 SS check, having another $1K/mo would be quite a huge improvement in giving them more options. If you've already getting $5K per month, another $1000 doesn't provide nearly the same increase in happiness/options. So, if I pay $1000 more to buy a first-class airplane seat for my trip to Cabo when I'm 55, and I run out of money when I'm 70 and have to live on a $1500 SS check, I'm not sure that I've done myself any favors. That $1000 would have bought a lot more happiness and options when I am broke than I enjoyed on that 3 hour plane trip.

Cannot argue with the statistics of number crunchers, the human factor and the unquantifiable that we gain through life experience confounds those like you that look at only stats.



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[samclem]

Quote:

Originally Posted by Moneygrubber Cannot argue with the statistics of number crunchers, the human factor and the unquantifiable that we gain through life experience confounds those like you that look at only stats.

I remain unconfounded--and unconvinced.

[Big_Hitter]

Quote:

Originally Posted by shotgunner My father had a small pension from the electric utility company, he worked for them for 30 years. It was not inflation adjusted. He had contributed 5% of his gross income towards it. In my mind he bought an annuity without an inflation adjustment clause on a 30 year installment plan.

what kind of return did he get on the 5%? I bet more than 5%.

I love contributory DB plans.

[Big_Hitter]

Quote:

Originally Posted by Moneygrubber Cannot argue with the statistics of number crunchers

no, you can't, the law of large numbers rules all

[kcowan]

Quote:

Originally Posted by bclover Rarely did I come across article (before) here where people said they saved money to actually enjoy life. It is/was always "save" because when you turn 90 you'll be destitute and eating cat food or healthcare is going to be so expensive you won't be able to afford it.

Yes I think you are onto something. It seems that the industry uses fear of failure rather than an opportunity to leverage as motivators.

The problem seems to be that no one gets paid to showcase those of us who are happy in retirement. We don't need any more insurance, annuities or financial advisors! Even AARP is trying to sell you something.

We need an association of happy people who choose not to work anymore.

[Mulligan]

Quote:

Originally Posted by Moneygrubber Firstly all should know I have the utmost respect for all those that visit this forum. I have learned a great deal and have a fascination with money and investing, hence my "handle". I have reached my retirement goals using many if the techniques discussed on this board by very intelligent and capable folks. I was simply reflecting on the high standard we , including me, place on portfolio success. My experience has seen those in their 90's with significant portfolios in nursing homes watching their funds drain away in a bed next to someone on medicaid receiving the same level of care. We expect to live into our 90's with a life that we can enjoy our hard earned savings, it is my hope we all achieve this goal. Cheers! Sent from my iPhone using Early Retirement Forum

That is funny you mentioned that... My 86 year old neighbor who I golf with is 25 years into a second marriage where they keep all finances separate. He said his wife is very frugal with her money. He said she does this because she says..." I have saved my money up, so if I have to go to The Home, I have plenty of money to have my own room for the rest of my life." At her age, that is way more important to her, than buying additional things. I am sure it provides a lot of comfort, as blowing it would actually cause her angst.


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[Cool_Sparrow]

Quote:

Originally Posted by Moneygrubber I am not telling people to not plan, sorry for the double negative.. But if you planned on a 95% success rate for crossing the street you would never leave the sidewalk. We take all kinds of risks every day that are much higher than running out of money in retirement, maybe i am the only one that sees the absurdity of it. Sent from my iPhone using Early Retirement Forum

I agree. This is what William Bernstein also warns about relying too much portfolio success probabilities in Backtest based or Monte Carlo calculators. He specifically says planning beyond 80% success probability is futile as it only increases the probability of a non-financial event (like war, turmoil or disease) in ruining the retirement. I think Moneygrubber is simply saying that planning portfolio success probabilities beyond a reasonable level (say 80-90%) ignores other risk factors in life that don't support this probability of longevity. It is a thorny problem but then there is no universal right answer here. I aim for 95% success rates in my FireCalc projections just to avoid extreme skews of tail events but to each their own.


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[haha]

Quote:

Originally Posted by samclem The rational thing to do when evaluation options in an uncertain environment is to examine the 1) likelihood of various outcomes and the 2) consequences of various outcomes. If you could quantify these outcomes (i.e. assign numbers to the "chances" and the "goodness or badness" of each one) you'd then multiply the two factors and have a good way to compare them. Then you'd take a course that maximizes the overall "future happiness" by allocating resources to each option.

This is what horse race bettors or other parimutuel bettors or poker players do routinely. The product is called the expectation of a bet. This idea is second nature to some of us, but exotic and foreign to others.

I also want to briefly comment on unindexed, fixed annuities, which are what almost anyone who is not some sort of government worker gets or buys. Some of us think that we can accurately assess the chances of meaningful inflation over many years. News flash- this cannot be done.

Best takeaway- if you possibly can, get and keep a government job, any government job. You will then have every taxpaying American worker working for you until you die, and maybe longer.

Ha

[Chuckanut]

The best solution to unwarranted negativity is to not watch or read the daily investment and stock market shows. Or the news. Or the interviews with politicians running for office. Or anything with 'wealth management' in the name.

[DrRoy]

Quote:

Originally Posted by bclover I didn't get that at all (the last part). One of the first questions I asked here was anyone actually "happy" retired lol Rarely did I come across article (before) here where people said they saved money to actually enjoy life. It is/was always "save" because when you turn 90 you'll be destitute and eating cat food or healthcare is going to be so expensive you won't be able to afford it

I totally saved money to actually enjoy life. I enjoy it now and still have a year to go to RE. I am looking forward to how much more I will enjoy it when I don't have to go to w**rk but still can spend what I want to because I saved what I needed to.

[DrRoy]

Quote:

Originally Posted by Independent My dad said: Plan like you'll live forever. Live like every day is your last.

I have this thing against absolute statements. I generally agree with the sentiment, but if you literally did the latter, I doubt that you would do the former. I am hoping to accomplish a blend of the two.

[FI by 2024]

Quote:

Originally Posted by bclover I said, that this site was one of the exceptions.

Actually no you didn't (sorry W2R, she didn't) but I suppose you are saying that because you stated you didn't like bogleheads and other retirement writing, I am supposed to infer that you think this site is an exception. If that's what you meant, then okay.


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[MRG]

Quote:

Originally Posted by Moneygrubber My experience has seen those in their 90's with significant portfolios in nursing homes watching their funds drain away in a bed next to someone on medicaid receiving the same level of care.

Not necessarily true. Some homes don't accept Medicaid. From what I've seen there was a difference in care. End of life care is not necessarily pretty no matter where you are. I don't want my last year, months or days surrounded by incompetent idiots. I heard my dad's tales, sadly they were true.

[Greg V]

Quote:

Originally Posted by Moneygrubber I am not telling people to not plan, sorry for the double negative.. But if you planned on a 95% success rate for crossing the street you would never leave the sidewalk. We take all kinds of risks every day that are much higher than running out of money in retirement, maybe i am the only one that sees the absurdity of it.

I agree we commonly take risks...in these Retirement discussions, even the 95 percenters are taking some risk. So...as you're making your plans, what do you consider the appropriate risk level that balances longevity concerns with current lifestyle and prevents "perfect" from being the enemy of "good enough?"

[Balance]

Wow! This thread feels like it has gone viral within in this Forum. Here's my take on it all

No one knows when their number will be called and we all struggle to know when to hold'em, fold'em, walk away and run. That said, as much as one invests in financial interests, one should invest as much or more in emotional interests. If you invest the time and effort in your spouse/SO, your kids, your extended family (siblings) you will be rewarded everyday henceforth and I am confident you will be secure in your waning days whenever that may be. I say this from experience.

Btw, I like Air Conditioning

[Big_Hitter]

Quote:

Originally Posted by Balance Wow! This thread feels like it has gone viral within in this Forum. Here's my take on it all

yep, better get a few posts in before Porky!

[Moneygrubber]

Quote:

Originally Posted by MRG Not necessarily true. Some homes don't accept Medicaid. From what I've seen there was a difference in care. End of life care is not necessarily pretty no matter where you are. I don't want my last year, months or days surrounded by incompetent idiots. I heard my dad's tales, sadly they were true.

Maybe they do not accept medicaid, but when you are in a nursing home that accepts medicaid they cannot provide a different level of service. I have personal experience with this. If a bed is open where i live they cannot refuse you.


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[Moneygrubber]

Quote:

Originally Posted by Greg V I agree we commonly take risks...in these Retirement discussions, even the 95 percenters are taking some risk. So...as you're making your plans, what do you consider the appropriate risk level that balances longevity concerns with current lifestyle and prevents "perfect" from being the enemy of "good enough?"

I have been using 95 + percent as thats seems to be what the calculators and pundits recommend. I am challenging the reality of it based on actual life experience. I could throw out a percentage that I think is more realistic but would be set upon by the statisticians...


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[Moneygrubber]

Quote:

Originally Posted by Cool_Sparrow I agree. This is what William Bernstein also warns about relying too much portfolio success probabilities in Backtest based or Monte Carlo calculators. He specifically says planning beyond 80% success probability is futile as it only increases the probability of a non-financial event (like war, turmoil or disease) in ruining the retirement. I think Moneygrubber is simply saying that planning portfolio success probabilities beyond a reasonable level (say 80-90%) ignores other risk factors in life that don't support this probability of longevity. It is a thorny problem but then there is no universal right answer here. I aim for 95% success rates in my FireCalc projections just to avoid extreme skews of tail events but to each their own. Sent from my iPhone using Early Retirement Forum

Agree!


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